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Beveridge Curve Shifts and Time-Varying Parameter VARs

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Abstract

We specify a simple search and matching model of the aggregate labor market allowing for productivity-driven changes in match efficiency. This mechanism leads to shifts in the Beveridge curve that are broadly consistent with the pattern observed in the United States. We simulate data from the fully nonlinear solution of the model and estimate a time-varying parameter vector-autoregressions (TVP-VAR) on the unemployment and vacancies series to assess whether the shifts in the underlying theoretical model are being picked up by the nonlinear time series model. The results suggest that the TVP-VAR attributes almost all of the shifts to changes in the volatility of the reduced-form shocks.

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  • Thomas A. Lubik & Christian Matthes & Andrew Owens, 2016. "Beveridge Curve Shifts and Time-Varying Parameter VARs," Economic Quarterly, Federal Reserve Bank of Richmond, issue 3Q, pages 197-226.
    • Handle: RePEc:fip:fedreq:00048
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    References listed on IDEAS

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    1. Fabio Canova & Filippo Ferroni & Christian Matthes, 2015. "Approximating Time Varying Structural Models With Time Invariant Structures," Working Paper 15-10, Federal Reserve Bank of Richmond.
    2. Frauke Schleer-van Gellecom (ed.), 2014. "Advances in Non-linear Economic Modeling," Dynamic Modeling and Econometrics in Economics and Finance, Springer, edition 127, number 978-3-642-42039-9, June.
    3. Christopher A. Sims & Tao Zha, 2006. "Were There Regime Switches in U.S. Monetary Policy?," American Economic Review, American Economic Association, vol. 96(1), pages 54-81, March.
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    6. Thomas A. Lubik & Christian Matthes, 2015. "Time-Varying Parameter Vector Autoregressions: Specification, Estimation, and an Application," Economic Quarterly, Federal Reserve Bank of Richmond, issue 4Q, pages 323-352.
    7. Pooyan Amir‐Ahmadi & Christian Matthes & Mu‐Chun Wang, 2016. "Drifts and volatilities under measurement error: Assessing monetary policy shocks over the last century," Quantitative Economics, Econometric Society, vol. 7(2), pages 591-611, July.
    8. Giorgio E. Primiceri, 2005. "Time Varying Structural Vector Autoregressions and Monetary Policy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 821-852.
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    2. Papież, Monika & Rubaszek, Michał & Szafranek, Karol & Śmiech, Sławomir, 2022. "Are European natural gas markets connected? A time-varying spillovers analysis," Resources Policy, Elsevier, vol. 79(C).
    3. Szafranek Karol & Rubaszek Michał, 2024. "Have European natural gas prices decoupled from crude oil prices? Evidence from TVP-VAR analysis," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 28(3), pages 507-530.
    4. Szafranek, Karol & Papież, Monika & Rubaszek, Michał & Śmiech, Sławomir, 2023. "How immune is the connectedness of European natural gas markets to exceptional shocks?," Resources Policy, Elsevier, vol. 85(PA).
    5. Patella, Valeria & Tancioni, Massimiliano, 2021. "Confidence Swings and Sovereign Risk Dynamics," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 195-206.
    6. Thomas A. Lubik & Christian Matthes, 2019. "How Likely Is the Zero Lower Bound?," Economic Quarterly, Federal Reserve Bank of Richmond, issue 1Q, pages 41-54.
    7. Thomas A. Lubik & Christian Matthes, 2015. "Time-Varying Parameter Vector Autoregressions: Specification, Estimation, and an Application," Economic Quarterly, Federal Reserve Bank of Richmond, issue 4Q, pages 323-352.
    8. Reusens Peter & Croux Christophe, 2017. "Detecting time variation in the price puzzle: a less informative prior choice for time varying parameter VAR models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(4), pages 1-18, September.
    9. Pooyan Amir-Ahmadi & Christian Matthes & Mu-Chun Wang, 2016. "Choosing Prior Hyperparameters," Working Paper 16-9, Federal Reserve Bank of Richmond.

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